S.D. UNIFIED PUTTING SURPLUS PROPERTIES UP FOR SALE

Controversial plan aimed at helping offset $120M deficit

Anticipated proceeds from selling off some of district’s surplus properties

Forget closing campuses or laying off teachers.

The most controversial cost-cutting measure to come from the San Diego school board this year might be its plans to sell off some of its most valuable assets: real estate.

On the market in the San Diego Unified School District are seven lots, including one that spans more than 2 acres just a block from Mission Bay and two blocks from the ocean and another parcel that includes 9 acres in the “coastal zone” near Point Loma and the Midway District.

Desperate to generate revenue and cope with the state’s fiscal crisis, the school board is selling off these surplus properties as a last resort. The anticipated proceeds of $26.7 million will help offset a $120 million deficit to the $1.1 billion operating budget for the 2012-13 school year.

“We really didn’t have a choice, given the budget situation,” said board President John Lee Evans. “My hope is that we won’t have to sell anything more. We have valuable assets, and I’d like us to develop ways to develop long-term revenue streams from them.”

Board Vice President Scott Barnett is the only trustee who voted against selling district property. He would prefer that San Diego Unified do more to leverage its assets — such as leasing or developing land.

He has likened the plan to “selling grandma’s jewelry to pay the rent” or “burning the furniture to heat the house.”

Purging school property can be risky for a district, especially if demographics shift unexpectedly and create demand for a campus after it’s gone. Many districts have run out of other cost-cutting options, said Ron Bennett, president of the financial consulting firm School Services of California, which advises districts throughout the state.

“Any time you take an investment asset and you use it for consumption, you are diminishing your long-term resources,” Bennett said. “Sometimes the first long-term objective is to survive the short term. During this time when the state of California has so inadequately funded schools, they are so desperate and the state has made them so. ... Districts are getting 20 percent less funding than they had five years ago.”

San Diego Unified, California’s second-largest district, isn’t the only one selling land this year.

The state does not track sales of school properties, but the Los Angeles Unified, Walnut Valley and Cucamonga school districts are among those considering real estate sales.

It used to be that when districts sold land and schools that they no longer needed, the proceeds could be used only to maintain other properties or fund capital improvements. That changed in the 2008-09 state budget, when the Legislature allowed districts to use money from sales of surplus property for one-time general fund expenditures — such as to cover a budget deficit, as opposed to ongoing costs like teachers’ salaries.

That flexibility is set to expire in January 2014.

San Diego Unified’s school board voted in June to put the seven lots on the market. Each lot’s sale will require at least four votes from the panel for final approval.